SCHEDULE P

(Form 1120-IC-DISC)

(Rev. September 2017)

Department of the Treasury 

Internal Revenue Service 

Intercompany Transfer Price or Commission

Attach a separate schedule for each transaction or group of transactions to 

which the intercompany pricing rules under section 994(a)(1) and (2) are applied.

▶ Go to www.irs.gov/Form1120ICDISC for the latest information.

For the calendar year 20 , or fiscal year beginning , 20 , and ending , 20

For amount reported on line , Schedule , Form 1120-IC-DISC

OMB No. 1545-0123

Name as shown on Form 1120-IC-DISC Employer identification number

Identify product or product line reported on this schedule. Also, enter the Principal Business Activity code 

number, if used. See instructions.

This schedule is for a (check one):

Single transaction . . . . . .

Group of transactions . . . . .

Part I IC-DISC Taxable Income

SECTION A—Combined Taxable Income

Section A-1—If marginal costing is not used

1 Gross receipts from transaction between IC-DISC (or related supplier) and third party . . . . . 1

2 Less costs and expenses allocable to gross receipts from transaction:

a Cost of goods sold from property if sold, or depreciation from property if leased 2a

b Related supplier’s expenses allocable to gross receipts from transaction . . . 2b

c IC-DISC export promotion expenses allocable to gross receipts from transaction 2c

d Other IC-DISC expenses allocable to gross receipts from transaction . . . . 2d

e Add lines 2a through 2d . . . . . . . . . . . . . . . . . . . . . . . . . . 2e

3 Combined taxable income. Subtract line 2e from line 1. If a loss, enter -0- . . . . . . . . . 3

Section A-2—If marginal costing is used

4 Gross receipts from resale by IC-DISC (or sale by related supplier) to third party . . . . . . . 4

5 Costs and expenses allocable to gross receipts from sale:

a Cost of direct material from property sold . . . . . . . . . . . . . 5a

b Cost of direct labor from property sold . . . . . . . . . . . . . . 5b

c IC-DISC export promotion expenses allocable to gross receipts from sales that 

are claimed as promotional . . . . . . . . . . . . . . . . . . 5c

d Add lines 5a through 5c . . . . . . . . . . . . . . . . . . . . . . . . . . 5d

6 Combined taxable income or (loss) before application of overall profit percentage limitation. Subtract 

line 5d from line 4. If a loss, skip lines 7 through 11 and enter -0- on line 12 . . . . . . . . . 6

7 Gross receipts of related supplier and IC-DISC (or controlled group) from all foreign and domestic sales 

of the product or product line . . . . . . . . . . . . . . . . . . . . . . . . 7

8 Costs and expenses of related supplier and IC-DISC (or controlled group) allocable to gross income

from such sales:

a Cost of goods sold from property sold . . . . . . . . . . . . . . 8a

b Expenses allocable to gross receipts from such sales . . . . . . . . . 8b

c Add lines 8a and 8b . . . . . . . . . . . . . . . . . . . . . . . . . . . 8c

9 Subtract line 8c from line 7. If a loss, skip lines 10 and 11 and enter -0- on line 12 . . . . . . . 9

10 Overall profit percentage. Divide line 9 by line 7. Check if controlled group optional method

is used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ 10 % 

11 Overall profit percentage limitation. Multiply line 4 by line 10 . . . . . . . . . . . . . . 11

12 Combined taxable income. Enter the smaller of line 6 or line 11 . . . . . . . . . . . . 12

SECTION B—50-50 Combined Taxable Income Method (Must be used if marginal costing is used. See instructions.)

13 Combined taxable income. Enter amount from line 3 or line 12 . . . . . . . . . . . . . 13

14 Multiply line 13 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . 14

15 Enter 10% (0.10) of IC-DISC export promotion expenses allocable to gross income from transactions

that are claimed as export promotion . . . . . . . . . . . . . . . . . . . . . . 15

16 Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

17 IC-DISC taxable income. Enter the smaller of line 13 or line 16 . . . . . . . . . . . . . 17

SECTION C—4% Gross Receipts Method (Cannot be used if marginal costing is used.)

18 Gross receipts from transaction. Enter amount from line 1 . . . . . . . . . . . . . . . 18

19 Multiply line 18 by 4% (0.04) . . . . . . . . . . . . . . . . . . . . . . . . 19

20 Multiply line 2c by 10% (0.10) . . . . . . . . . . . . . . . . . . . . . . . . 20

21 Add lines 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

22 Combined taxable income. Enter amount from line 3 or amount computed under special rule. If special

rule is applied, check here . See instructions . . . . . . . . . . . . . . . . . . 22

23 IC-DISC taxable income. Enter the smaller of line 21 or line 22 . . . . . . . . . . . . . 23

For Paperwork Reduction Act Notice, see the Instructions for Form 1120-IC-DISC. Cat. No. 11478S Schedule P (Form 1120-IC-DISC) (Rev. 9-2017)
Schedule P (Form 1120-IC-DISC) (Rev. 9-2017) Page 2

Part II Transfer Price From Related Supplier to IC-DISC (See instructions.)

24 Gross receipts from transaction. Enter amount from line 1 or line 4, Part I . . . . . . . . . . 24 

25 Less reductions:

a IC-DISC taxable income (but not to exceed amount determined in Part I) . . . 25a

b IC-DISC export promotion expenses allocable to gross income from transaction . 25b

c Other IC-DISC expenses allocable to gross income from transaction . . . . 25c

d Add lines 25a through 25c . . . . . . . . . . . . . . . . . . . . . . . . . 25d

26 Transfer price from related supplier to IC-DISC. Subtract line 25d from line 24 . . . . . . . 26 

Part III IC-DISC Commission From Related Supplier (See instructions.)

27 IC-DISC taxable income (but not to exceed amount determined in Part I) . . . . . . . . . . 27 

28 IC-DISC export promotion expenses allocable to gross receipts from transaction . . . . . . . 28 

29 Other IC-DISC expenses allocable to gross receipts from transaction . . . . . . . . . . . 29 

30 IC-DISC commission from related supplier. Add lines 27 through 29 . . . . . . . . . . 30 

Instructions

Section references are to the Internal Revenue 

Code unless otherwise noted.

Purpose of schedule. Use Schedule P to

show the computation of taxable income used 

in computing (1) the transfer price from a 

related supplier to an IC-DISC (Part II), or (2)

the IC-DISC commission from a related

supplier (Part III).

Complete and attach a separate 

Schedule P to Form 1120-IC-DISC for each 

transaction or group of transactions to which 

the intercompany pricing rules of sections 

994(a)(1) and (2) are applied.

IC-DISC taxable income. Generally, the

intercompany pricing determinations are to be

made on a transaction-by-transaction basis.

However, the IC-DISC may make an annual

election to determine intercompany pricing on

the basis of groups consisting of products or

product lines. If the group basis is elected,

then all transactions for that product or

product line must be grouped. Each group is

limited to one type of transaction (for 

example, sales, leases, or commissions).

A product or product line determination will 

be accepted if it conforms to either of the 

following standards: (1) a recognized industry 

or trade usage, or (2) major product groups 

(or any subclassifications within a major 

product group) (see Schedule P (Form 1120-

IC-DISC) Codes for Principal Business Activity 

in the Instructions for Form 1120-IC-DISC). 

The corporation may choose a product 

grouping for one product and use the 

transaction-by-transaction method for 

another product within the same tax year.

Generally, the computation of taxable 

income under the intercompany pricing rules 

will not be permitted to the extent that their 

application would result in a loss to the 

related supplier.

Each of the following methods may be 

applied for sales, leases, and services. See 

the regulations under section 994.

50-50 combined taxable income method. 

The transfer price the related supplier charges

the IC-DISC, or the related supplier’s IC-DISC

commission, is the amount that lowers the

taxable income the IC-DISC derives from the

transaction to an amount that is no more than 

the sum of (1) 50% (0.50) of the IC-DISC’s 

and related supplier’s combined taxable 

income attributable to the qualified export 

receipts from the transaction and (2) 10% 

(0.10) of the IC-DISC’s export promotion 

expenses (as defined in Regulations section 

1.994-1(f)) attributable to the qualified export 

receipts. Do not include in combined taxable 

income (line 13) the discount amount reflected 

in receivables (on the sale of export property) 

that a related supplier transferred to the 

IC-DISC. See Regulations sections 

1.994-1(c)(3) and (6)(v).

If marginal costing rules apply, see Part I, 

Section A instructions below. 

4% gross receipts method. The transfer

price charged by the related supplier to the

IC-DISC or IC-DISC commission from the

related supplier is the amount that ensures

that the taxable income derived by the 

IC-DISC from the transaction does not

exceed the sum of (1) 4% (0.04) of the 

qualified export receipts of the IC-DISC 

derived from the transaction and (2) 10% 

(0.10) of the export promotion expenses (as 

defined in Regulations section 1.994-1(f)) of 

the IC-DISC attributable to the qualified 

export receipts.

Section 482 method. The transfer price the 

related supplier charged the IC-DISC, or 

IC-DISC commission from the related

supplier, is the amount actually charged, but

is subject to the arm’s length standard of

section 482. Do not complete Schedule P if

the section 482 method is used.

Incomplete transactions. For the 50-50

and 4% methods, if the related supplier sells

property to the IC-DISC during the year but

the IC-DISC does not resell it during the year,

the related supplier’s transfer price to the 

IC-DISC must equal the related supplier’s

cost of goods sold. Do not complete

Schedule P for incomplete transactions. The

related supplier’s transfer price to the 

IC-DISC must be recomputed for the year in

which the IC-DISC resells the property and

the transaction must then be reported on

Schedule P for that year.

Part I, Section A—Combined Taxable 

Income. Complete Section A-1 only if

marginal costing is not used.

For purposes of line 2d, be sure to include 

the appropriate apportionment of deductions 

that are not directly allocable such as interest 

expenses and stewardship expenses. See 

Temporary Regulations sections 1.861-11T(f) 

and 1.861-14T(f) for an explanation of 

appropriate apportionment.

Complete Section A-2 if marginal costing is 

used. The marginal costing rules may be used 

only for sales, or commissions on sales, of 

property if the 50-50 method is used.

Marginal costing cannot be used for 

(1) leasing of property; (2) performance of 

services; or (3) sales of export property that 

(in the hands of a purchaser related under 

section 954(d)(3) to the seller) give rise to 

foreign base company sales income as 

described in section 954(d) unless, for the 

purchaser’s year in which it resells the 

property, section 954(b)(3)(A) applies or the 

income is under the exceptions in section 

954(b)(4).

Line 10. The overall profit percentage may

be computed under an optional method. See

Regulations section 1.994-2(c)(2) for details.

Part I, Section B and Section C. Complete

Section B or Section C. If marginal costing is 

used, you must complete Section B.

Line 22. If IC-DISC taxable income on a

sale is computed under the 4% method and

the IC-DISC chooses to apply the special rule

for transfer prices or commissions, check the

box in line 22 and attach a separate 

statement showing the computation of the 

limitation on IC-DISC taxable income 

determined under the special rule and enter 

the amount on line 22. Under the special rule, 

a transfer price or commission will not be 

considered to cause a loss for a related 

supplier if the IC-DISC’s net profit on the sale 

does not exceed the IC-DISC’s and related 

supplier’s net profit percentage on all their 

sales of the product or product line. See 

Regulations section 1.994-1(e)(1)(ii) for details.

Reporting Part II and Part III amounts on 

Form 1120-IC-DISC. If the computed 

transfer price for sales, leases, or services 

(Part II) or IC-DISC commission (Part III) is 

entered on more than one line of Form 

1120-IC-DISC, attach an explanation 

indicating the portion of the total that is 

applied to each line.

Schedule P (Form 1120-IC-DISC) (Rev. 9-2017)